Jan 2024: New Small Business Regulations in 2024
Source: US News & World Report
Registering with Financial Crimes Enforcement Network
Many U.S. small businesses will need to register with an agency called the Financial Crimes Enforcement Network (FinCEN) by Jan 1, 2025 as part of an act passed in 2021 called the Corporate Transparency Act. The act was intended to get a look inside shell companies and crack down on attempts by “criminals, organized crime rings, and other illicit actors to hide their identities and launder their money through the financial system,” Treasury Secretary Janet Yellen.
Businesses with more than 20 employees and more than $5 million in sales can qualify for exemptions, but that leaves an estimated 32 million small businesses that aren’t exempt. The owners and part-owners of those businesses must register personal information with FinCEN, such as a photo ID and home address.
Businesses created after Jan. 1 will have only 90 days to comply. The cost of not complying could be steep: Penalties can run as high as $10,000.
Info on reporting can be found here: https://www.fincen.gov/boi-faqs#B_2
$600 IRS Rule
In Nov 2023, the IRS again delayed the requirement that payments of over $600 via third-party providers like payment apps such as Venmo and Zelle, and online marketplaces, have to be reported.
The requirement, part of the American Rescue Act, was delayed last year but set to take effect for the 2023 tax year. Now, the IRS says businesses won’t have to report that revenue for 2023, either. They’re planning a threshold of $5,000 for the tax year 2024 as part of a phase-in to eventually implement the $600 reporting threshold.
Wages & Overtime
Over 20 states will increase hourly minimum wages in 2024. For example, on Jan. 1 2024, Ohio’s hourly minimum wage increased from $10.10 to $10.45 (tipped workers from $5.05 to $5.25). Nebraska’s minimum wage rose from $1.50 to $12 on Jan. 1, and Florida’s will go up by $1 to $13 on Sept. 30.
Also, in Aug 2023 the US Dept. of Labor announced a proposed rule that would let 3.6 million more workers qualify for overtime. The proposed regulation would require employers to pay overtime to salaried workers who are in executive, administrative and professional roles but make less than $1,059 a week, or $55,068 a year for full-time employees. That salary threshold is up from $35,568.
Many in the business community agree this will face legal challenges because raising the threshold would have a big impact on businesses. The comment period closed on Nov. 7 so the Labor Department could issue the final rule any time in 2024.
New reporting requirement for small business loans
It’s notoriously difficult for small businesses to secure loans because they often don’t have the profit or track record needed to assure banks of their ability to pay back the money. Women and minority-owned businesses especially find it difficult to get loans.
In an effort to have less discrimination and more transparency around the loan process, the Consumer Financial Protection Bureau this year said it would require banks to start reporting demographics and income of small business loan applicants.
The aim is to create a database similar to what the mortgage industry has. Bank regulators have for decades collected data on residential mortgage applicants — including race, geography, whether the loan was approved and the interest rate — under a 1970s era law known as the Home Mortgage Disclosure Act. The data collected under HMDA has long been used by regulators and the public to look for potential signs of banks discriminating against borrowers, also known as redlining.
But small business advocacy organizations say these requirements will slow down the loan process and could make it even more difficult for small businesses to get loans, not easier. The regulations will “bury small businesses and financial institutions with costly and time-consuming paperwork, expose small-business borrowers and lenders to increased litigation and privacy risks, drive more small banks out of business, and limit competition in the financial lending space,” said Small Business & Entrepreneurship Council president and CEO Karen Kerrigan.